In 1869, Robert McLaughlin founded the McLaughlin Carriage Company in a blacksmith’s shop. The company soon grew to the point where it was manufacturing 25,000 horse-drawn carriages a year, grossing $1 million in 1898 – that’s about $30 million in today’s dollars.
But when Robert’s son, Sam McLaughlin became President a few years later, he looked to the future – and it didn’t involve horse-power of the four-footed kind. In 1907, Sam moved to the forefront of innovation, and started making automobiles. Eventually, the McLaughlin family business was making Buicks and Chevrolets.
Imagine where that company would be if Sam had insisted on sticking to blacksmithing.
We’re at a similar point today. Unless we embrace and adopt digitalization, every company, world-wide, is the equivalent on that blacksmith shop, circa. 1907.
You may reply, “No problem. We already have digitalization.” Sure, today, every successful company has an element of digitalization – our IT departments. But having it, or using it effectively to innovate and grow, are not at all the same things.
Perhaps surprisingly, for many of us, this function is almost entirely inward-facing – it serves the internal communication needs of our employees, and it builds firewalls to ensure corporate security.
What it doesn’t do is enable collaboration and communication on a broader – even global – scale – collaboration with stakeholders, potential stakeholders, customers, potential customers, creators, and even competitors who have a shared challenge or opportunity that we all could benefit from.
There is a new report from McKinsey & Company that addresses this contradiction very effectively. And, not surprisingly, the report calls for a change in approach to IT and digitalization in general. The McKinsey report notes, “To fully benefit from new business technology, CIOs need to adapt their traditional IT functions to the opportunities and challenges of emerging technology “ecosystems.”
The report stresses that the common, inward-facing approach – which it terms “business as usual” –will not lead to success. It says, “In an ecosystem environment, an exclusive focus on ‘protecting the center’ can limit a company’s ability to capitalize on emerging opportunities. To adapt their complex business-technology architecture to function in a world of ecosystems, CIOs will have to figure out how to simultaneously draw external technologies closer while managing security issues and getting a handle on the accelerating stream of technological innovations.”
In fact, there are several layers to this digitalization shift. McKinsey suggests that we must move from being internally-focused through the stages of being “customer-facing” and “bilateral” (collaborating with supply chain providers, manufacturing partners, government agencies and others), to what they term “Ecosystem IT”, which involves collaboration with vendors, other industries, new and future markets, and much more.
This is the future. As the McKinsey report suggests, “The future of integration into external ecosystems will force companies to interact with many more partners covering a broad range of functions, ranging from customer sourcing to social advertising to payment solutions.”
There are enormous advantages for companies that move quickly toward digitalization on an ecosystem level – and perhaps they can be most simply summed up in three words: “survival, sustainability, and success”.
In very practical terms, this open concept IT allows vastly improved “end to end” customer service; integration of suppliers, partners and customers into an instant collaborative ecosystem; creation of new partnerships; and destruction of internal silos that are barriers to collaboration, among many other benefits.
Moving into a digital future requires an investment of time and resources; more importantly, it demands an investment of willpower – it will never be enough to accede reluctantly, because that will leave our companies well behind the curve.
Digitalization – your new IT Ecosystem – must be embraced with enthusiasm and supported with all the resources necessary. You have to get behind it, completely, in order to stay ahead.
I’m not suggesting this is an easy change; but I am insisting it is an essential one. If we do not embrace outward-facing digitalization, we will indeed find ourselves alone in an empty blacksmith shop. With no horses in sight.